Taking Care of Business as a Freelancer

You’ve probably heard the term “gig work” or the phrase “gig economy” in the news quite a bit over the last few years. A lot of that conversation has focused on the new category of gig jobs created by app companies like Uber and Instacart. 

But for years — long before you could order up a ride to the airport or a tofu breakfast burrito from your phone — there’s been a workforce of independent contractors or “freelancers,” doing professional, often high-paying jobs for clients and businesses. And the prevalence of freelance work has only increased since the COVID-19 pandemic.

A study by Upwork found that 36% of American workers freelanced in 2020, and three in five say they’re making the same or more money freelancing than they would be working for a traditional employer. The study also found that as much as half of the total Gen Z workforce has freelanced at some point in the last year, and nine out of 10 plan to continue.

Freelancing has been a way for some people to get by after losing their job or needing to scale back during the pandemic. But for many, freelancing is a career choice. They enjoy the freedom that comes with working for themselves, choosing the projects they take on, and working remotely on their own time. Both small businesses and large corporations (and everything in between) hire freelancers to help with various projects, from copywriting to graphic design to data science.

There are plenty of benefits to freelance work that you might find enticing — setting your own hours, avoiding office politics, or even a “pants optional” dress code. But being a freelancer also means you are your own employer — there’s no sales or accounting team to take care of things for you. Finding clients and managing the business is up to you. There’s a lot to consider and plan for, especially when you’re just getting started. So let’s dig into some basics.

Establishing your business 

Obviously, the first step to becoming a wildly successful freelancer is to buy one of those placards for your desk that says “Every Day I’m Hustlin” or “Girl Boss.” But after that, it’s probably important to make sure your business is legally established.  

DBA vs. sole proprietorship

The most common ways freelancers set up shop is with a sole proprietorship (i.e., an unincorporated business under your name) or a DBA (“doing business as”) if you want to establish a business name other than your own. As a sole proprietor, you don’t have to register or file any paperwork with the government; however, there is a bit of risk. You’re personally liable if the business (you) gets sued or incurs any debts. For a DBA, you’ll have to file an application, and each state has different laws and requires different permits or business licenses. LegalZoom has some good resources to help you decide which route to take and how to get started.

Finding clients

As a freelancer, you are your own salesperson when it comes to securing clients. You can tap into your existing network, make new connections, market your services online, or ideally, all of the above. 

If you don’t already maintain a portfolio or personal website, that’s a great place to start. Having an online presence gives you a place to send potential clients who want to take a look at your work to see if your skills might be a good fit for their project. You don’t need anything fancy, and there are plenty of sites where you can build a basic website — like Squarespace and Wix — that require little to no coding or design abilities. There are also free portfolio sites where you can host your work, like Contently and Behance.

Networking online via LinkedIn and at in-person events (when it’s safe to do so) is a great way to put yourself out there, whether it’s to learn from others in your field or solely to drum up business. And reaching out to acquaintances and friends in your professional networks (like your Alpha Kappa Psi brothers!) is a great way to get referrals or intros to potential clients.


No matter the size or scale of a project, it’s essential to have clear, detailed parameters in place with written agreements on both sides. Having formal documentation to sign shows your clients that you’re a professional and protects you legally should any problems arise with important things like, you know, getting paid for your work.

A “freelance contract” or “letter of agreement” is a document you should have in place with each client and project you take on that explains the terms you’ve agreed on — what work will be performed, at what rate, for what length of time, etc. It’s a legally binding document that sets expectations and ensures both parties are on the same page.

Sites like LegalTemplates and even Microsoft Office provide free, downloadable templates for freelance contracts as well as other documents you’ll need, such as invoices and statements of work.


One of the most challenging things for many freelancers is deciding how to structure their fees. There’s no formula or algorithm that can tell you precisely what you should charge, as there are so many factors that come into play. The tricky thing is finding that sweet spot in which you’re not selling yourself short by charging too little (know your worth!) but not setting your fees way too high and pricing yourself out of the running with potential clients.

Hourly pricing is pretty typical for freelancers as it keeps things relatively simple. You set a fixed rate and bill by the hour. The only thing to be mindful of when charging by the hour is making sure expectations are clear, and the lines of communication are open between you and your client. For example, it can be helpful to estimate upfront how many hours you think a project will take and let your client know if you feel something may require more time.

With a project-based or “fixed” pricing model, you charge one fixed rate to complete a project. This is a good option if the project has clearly defined deliverables. But keep in mind, some projects tend to grow bigger than anticipated (creatives often call this “scope creep”), and the final deliverable can end up taking way more time than you bargained for — and you still only take home that same set amount of money. 

Doing a little research can help when setting your rates. Sites like Upwork and Glassdoor can give you an idea of average hourly rates for freelancers in different regions and industries. You can also ask around. Network with other freelancers (ideally, those you’re not competing with) and see what they charge and how it compares.

Financials & taxes

To keep your personal finances separate from your work finances, you might consider opening a business account to deposit your earnings and pay for any business expenses. Another important thing for someone self-employed is to have a safety net in savings, in case you were to lose a client. Intuit recommends having at least 4-6 months’ worth of earnings saved. 

Another consideration with freelancing is that you don’t get some of the same benefits you might have when working for a traditional employer, namely health insurance and retirement benefits. But there are options available for self-employed people; you just have to decide which ones are right for you. A qualified financial advisor can help you understand what your options are for retirement plans. As for health insurance, The Freelancers Union recommends researching your options and checking your eligibility for any free or subsidized plans. They also have an online tool for finding handpicked insurance plans for freelancers

Filing taxes

As if filing taxes every spring wasn’t painful enough, being a freelancer can make things a bit more complicated when settling up with Uncle Sam. As a freelancer, you’re considered self-employed by the IRS, meaning you have to file your taxes as a business owner. 

You’re probably familiar with working for a traditional employer and getting a W-2 that reports all the income you earned that year. As a freelancer, you’re responsible for gathering and reporting all your sources of income from all the projects you’ve done. (This is again why having written documentation with all your clients is important, as well as maintaining a separate business bank account.) You should also receive a 1099-NEC form from each of your clients if you did work for them exceeding $600.

When you’re self-employed, you also get stuck with the self-employment tax on top of your regular income tax (the current rate is 15.3%). This is in place of the Social Security and Medicare taxes deducted from your paycheck with a traditional employer.

It’s not all bad on the tax front, though; there are also some benefits. When you’re considered self-employed, the government allows you to take deductions for business-related expenses, like home office equipment, internet, business travel, etc. (Check out Investopedia’s list of 15 Tax Deductions and Benefits for the Self-Employed.)

If you’re considering a career (or even just a side hustle) as a freelancer, definitely talk to a qualified professional for advice on all the financial and tax-related implications. The Smartasset Advisor Match tool is an easy way to find financial advisors in your area.

*Disclaimer: This article is for general informational purposes only and not intended to provide specific advice or career recommendations. It is only intended to provide education about the financial considerations for freelance work. Any ideas or strategies discussed should not be undertaken by any individual without consultation with a qualified financial professional or career consultant.